Preface
Chapter 3: ERP Solutions, Supply Chain, and Web- Based Enterprise Management
3.1 Why Any-to-Any Access to Virtual Information Is So Important to Business Partners
Web designer Tim Berners-Lee once explained how the idea of any-to-any networked access to stored information elements came to him. He felt that the interesting thing about information elements was all the connections between them. By contrast, the then-prevailing method of storing information in computers favored its organization into hierarchical files. This made it difficult to access data, particularly so because it required the intervention of programmers to retrieve it.[1]
To get out of that hierarchical lockbox, Berners-Lee wrote a simple program that would store and retrieve information elements on the basis of their connections to other information elements. He also developed an effective means of accessing it, one that imposed a bare minimum of technical constraints on the user. Out of this was born the World Wide Web (WWW).
The concept behind the Web combines hypertext, which interconnects information, with the functional notion behind the Internet, which interconnects computers. As in so many other cases, the environment contributed to the invention. CERN had heterogeneous computer platforms but its researchers needed to share information. This made Berners-Lee aware of the importance of a simple, platform-independent means for managing and communicating information.
Berners-Lee's ingenuity is evidenced by the fact that he was able to conceptualize a solution that had escaped thousands of other information scientists faced with a similar environment: handling any-to-any connectivity in a landscape composed of heterogeneous computer platforms and incompatible software, and therefore enabling users to communicate with one another over the system.
This is precisely what we are doing by interconnecting the ERP systems of manufacturing companies and their suppliers. The paradigm of integrating enterprise resource planning into the smart supply chain is no different than the one that led to WWW.
The basic concept, Berners-Lee suggests, is that the solution has to be completely decentralized. That would be the only way the system would scale, so that as more people used it or some failures occurred here or there, it would not get bogged down. The basic notion, then as now, is that there should be no centralized point of control. If there is one, it would rapidly become a bottleneck, severely restricting the growth of integrative ERP applications and seeing to it that the ERP would never scale up to the task that must be performed.
The practical example of a successful application concerning WWW is very appealing because it helps to explain how one should work with an ERP system integrated into the supply chain. A first goal of this any-to-any design must be to shield users from systems complexity by hiding those technical aspects that were constantly in the way of finding the information they needed. The next goal is that of ensuring that information is easy to locate and use for any authorized person or machine.
On the Web, this is the background of the Universal Resource Locator (URL), which gives every page in the database a standard address. Other innovations that have come with the Web include the
HyperText Markup Language for page formatting and the HyperText Transfer Protocol (HTTP), which permits handling pages in an efficient, user-friendly manner. Berners-Lee also developed what was at the time a rudimentary browser for searching and editing text.
Integrators of ERP into the smart supply chain can learn a great deal from the interesting features briefly described in the preceding paragraphs because these have helped to create a cross-platform program for sharing documents. Notice, however, that they have not been the last breakthroughs as the Web has
seen a golden horde of other contributions. Good solutions tend to grow as a function of time, as Exhibit 3.2 suggests.
Exhibit 3.2: The Functionality of Any Solution Must Match the Requirements Imposed by the Information Environment
If the new applications environment is successful, and one can hope that the integration of ERP into the smart supply chain will match this goal, then the way to bet is that the envelope of future requirements will be much greater than the one currently projected. As with the Web, from the start, users should love their new-found freedom in using computers and networks. Only then, in a short time span, can this make the ERP/supply chain integration a place that is:
Universal in the type of information it can accommodate and in the ability of people to access it
Intercreatively oriented, allowing personal creativity and collaborative efforts to have a positive impact
The lessons from the history of WWW do not end here. Recall that during the 1990s, many new contributions enhanced the Web. It also became evident that any new system must be multimedia oriented, while in terms of programming languages, new facilities must go well beyond C++, HTML, and HTTP. HTML's successor, Extensible Markup Language (XML) has helped to create a semantic web of interconnected information elements and has made feasible rich associations between elementary database contents.
Supported through sophisticated software, advanced facilities should allow users to upload, download, or otherwise access information as easily as exchanging information over the telephone; deal with information that constantly changes; and be able to modify such information when necessary by branching out in a nonlinear way. In ERP/supply chain integration terms, this means that current browsers, from AOL/Netscape Navigator to Microsoft Explorer, must become increasingly more flexible, sophisticated, and functional.
As will be seen in Chapter 3.2, in connection with globalization, the more advanced software that will be coming to the market during the coming years must fulfill a host of novel functional requirements. One such requirement is to make the Internet system operate faster in a way that allows one to measure product performance as well as support yardsticks for productivity. Well-managed companies are continually aiming to:
Increase the productivity of their staff
Accelerate product development cycles
Reduce their time-to-market
Improve the market appeal of their products
One of the reasons the Internet has been instrumental in expanding the commercial horizons is that 65 to 70 percent of important functions in everyday trades are still not automated. As Exhibit 3.3 suggests, their efficient handling is not just a matter of using computers, but requires agents, multimedia support, an expanded range of personal services, and specific goals.
Exhibit 3.3: 65 to 70 Percent of Important Commercial Functions Are Still Not Automated
Under certain conditions, the Internet can help in this direction. This is seen in the fact that all sorts of manufacturers and vendors extensively use the Net to support their cross-border design effort and accelerate delivery of documentation, including results of models and tests. The Web influences their ability to deliver engineering samples and to provide some level of customization without compromising performance, quality, price, or project scheduling.
However, a great deal still remains to be done in avoiding costly duplication of R&D efforts. Cognizant sources estimate that up to a third of all R&D money is wasted on copying an existing technology; and existing patents are not properly exploited on a global scale. Therefore, recent faculty meetings at UCLA have emphasized the importance of teaching engineering students the Critical Path Method (CPM). I, however, would opt for a blend of CPM and ERP.
Equally important are better tools for database mining. It is estimated that 70 to 90 percent of the technical information published in patents is never published elsewhere. Organizations that do not have a regular patent alerting service in place significantly increase the risk of both duplication and
infringement. The Internet could help by providing the missing link.
At the marketing end, while customers have the possibility to optimize their costs, the vendor also gains because an auction can be used as a channel to clear out a backlog of unsold products. Better
inventory management is promoted by the fact that computer companies selling on the Net never have on hand more than six days' worth of inventory. This is crucial in a business where the value of products is constantly shrinking and technological advancements can make the products obsolete overnight.
Another advantage of the direct, online customer/vendor relationship promoted through ERP information is Internet-assisted personalization of products at the vendor site. Companies that have mastered this process are saying it is rewarding, both in the way it impacts the customer base and in terms of better focused R&D.
Finally, another benefit comes from better balanced production lines and distribution channels. In the past, many layoffs came in response to shortfalls in product demand. By contrast, the planning process of downsizing involves job reductions driven by a desire, and the associated possibility, to operate more efficiently even when demand is strong.
Speaking from personal experience, the best type of downsizing occurs when the board wants to flatten the organizational structure and when managers and other professionals are rewarded for higher efficiency through profit-sharing and stock options. Without the Internet, while downsizing can reduce labor costs per worker, it also tends to reduce sales per worker. By contrast, the ingenious use of supply chain software, the way tier-1 companies are doing, significantly increases sales per worker even in a trimmed-down organization.
[1]The MIT Report, November 1999, Volume XXVII, Number 9.